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March 1996


Introduction and Summary

The OECD Ministerial Symposium on the Future of Public Services meets at a crucial time. Public services across the OECD are under pressure from a variety of sources. In some countries the public sector has faced an ideological onslaught. Elsewhere services have been cut back by the drive to reduce public deficits and respond to globalisation. Whatever the motivating force for change, the impact is often felt by the users of services who are least able the fend for themselves, as well as by public service workers whose wages and terms of employment are frequently undermined to achieve "savings".

Meanwhile changes in demographic trends and consumer preferences are increasing the demand for public services in areas such as community care for the elderly, health care, continuing education and environmental services. Much of this demand will continue to have to be met by the public sector, which for many services is best situated to deliver efficiency, effectiveness, universality and equity simultaneously.

The debate on these issues should be conducted in a pragmatic way and free from the ideology that has dogged past discussions. It should include a thorough evaluation of the scope, role and structure of public services (including municipal services and public utilities) in their support for the economy, and the extent to which market mechanisms can deliver quality services alone or in partnership with the public sector. The impact of all policies on social cohesion must be considered.

This TUAC paper focuses on the "partnership" approach to reforms in the public sector. In essence, the "partnership" approach is based on an understanding that public service employees, whether directly employed by public authorities, or by private sector providers, are stakeholders (along with users, taxpayers and governments) with views and opinions that must be accounted for when decisions are taken on the future direction of the services that they produce and deliver. Section One of the paper discusses the trade union view of the scope, role and structure of government. Section Two sets out the TUAC "partnership" approach to public service management and reform, and presents some examples of "good practice". Section Three sets out proposals for future OECD work in this area.

1. The Scope Role and Structure of Government

Globalisation and the Role of Government

The scope, role and structure of government in the economy is now the subject of intense debate across the OECD. Good public services contribute to a nation's competitiveness. They contribute to the social cohesion necessary to make an economy function. They instill confidence and security in the labour force for managing change and so contribute to the dynamic efficiency and adaptability of the labour market. Ultimately economies are made up of end users where social factors matter.

Yet some policy advisors approach public services from an ideological standpoint arguing that less government per se is better for a market economy to function. This perception has been part of the ongoing debate on economic globalisation. It is argued that by cutting or holding down taxes and state borrowing it will be possible to increase an economy's national competitiveness in the global market place. Countries, in addition to companies, are in competition with one another. The short-term winners, in terms of attracting foreign direct investment and multinational enterprises, and increasing domestic investment (thereby increasing employment), will be those that offer competitive corporate tax regimes, and an "enterprise culture" based on minimum government intervention in and regulation of the economy. Such a view is short-sighted.

Global financial markets are also forcing governments to rethink their role in the economy. To attain "credibility" and thereby reduce pressure on long-term interest rates, at a minimum, the "structural" element of government budgets should balance. In the present context this means fiscal retrenchment.

In tandem with global pressures on finance there is claimed to be a spontaneous domestic political pressure to cut or hold down taxes. One further source of pressure is demographic change, with declining participation rates and increasing dependency ratios forcing a rethink of welfare systems, including health, education and state pension provision.

Financing Public Services

The outcome of this drive for smaller government is that public services and the financing of them comes under pressure. However, this is not a new phenomenon as shown by the reorientation since the early 1980s of government thinking on the ownership, control and financing of many public sector operations. Key public sector utilities or services have been, or are being privatised, often with their monopoly status intact. Contracting out, outsourcing and moves towards unfunded decentralised provision of services are other ways in which governments have sought to reduce their role in and, responsibility for, the costs of public services. In association, the use of market mechanisms in the production and delivery of services has grown.

The Limits to Market Mechanisms in Public Services and Learning the Lessons

Trade union experience of these experiments in public sector and service provision show that in many instances the limits to market mechanisms in the provision of public services have been reached, and in other instances they have inflicted economic and social damage. That is not to say that market mechanisms do not have a key role to play here. On the contrary, TUAC sees an essential role for the private sector. However, policy makers should understand the circumstances required to make a mixed system deliver quality public services.

Prior to reforms being made, a thorough cost benefit analysis should be undertaken. In addition to an evaluation of cost savings, this exercise should also evaluate the likely long-term impact of reforms on the quality and effectiveness of services and their likely effects on equity. The analysis should also include the human dimension, which includes the effects on workers, whether in terms of wages, and general conditions of employment, including hours of work, training, promotion, and equal opportunities, as well as user and service considerations.

2. Managing for the Future: The Trade Union "Partnership Approach" to Public Service Management and Reform


Workers and their trade unions have been portrayed as barriers to change in the public sector. Where this has been true, it has often been for good reasons. Reforms have often been introduced without prior consultation and the involvement of workers and their representatives in the change process. Moreover, reforms have sometimes been introduced with the explicit aim of cutting workers' wages and conditions of employment -- as the only way to achieve cost savings. Counter arguments on the long-term effects of or alternatives to such moves are then portrayed as barriers to change -- with the added dimension that workers and trade unions are viewed as opponents of change. In practice, managers faced with reforms which are not working, may then have to introduce costly remedial changes, usually along the lines of those suggested by unions, to rectify emerging problems.

Recognising this, many public service trade unions are now acting in a proactive way to promote desirable changes. In many cases trade unions are at the forefront of change and proposing reforms, sometimes in the face of opposition from public authorities and management. TUAC has called for a "partnership" approach to change, which is not about change for the sake of change, but about all the parties working together in advance of change, to identify the objective conditions necessary to deliver quality public services which satisfy taxpayers, the demands of service users and the staff that deliver them. This may or may not mean the extension of market mechanisms into the production and delivery of services.

The "Partnership" Approach to Public Sector Reform: "Best Practice" Case Studies

The following examples are illustrative of the many innovative ways in which public service trade unions are proposing reforms, and working with management and the public authorities to effect change.

The German Trade Union "Partnership" Approach to Change: Hagen

A trade union-led initiative in Hagen near Dusseldorf has now made it possible for citizens to apply for a passport, renew a driving licence, order theatre tickets, and have access to a further 32 services at a new one-stop municipal service shop. The architect of this initiative is the OTV, the German public service union that persevered to effect change in the face of opposition from certain local politicians, fearful of the start-up costs.

Following a national conference of the OTV in 1988, a policy paper, 'Shaping the Future through Public Services' was developed which led to further policy papers in three areas: reform of public management, the role of public companies in promoting sustainable economic growth, and the future of health and social services. From this, local initiatives were developed, including Hagen, where the focus would be on improved municipal information and advice services.

After six months of detailed research a plan for a one-stop shop was developed, where citizens would no longer have to go to a variety of offices for different services, but could access them through a single office. A training plan was implemented, such that staff would be familiar with all services on offer, and not just a few as in the past. In addition, a plain language 'info list' was developed to aid staff and customers. In agreement with staff the office was to be open to the public for 45 hours a week -- more than twice as long as was previously the case for individual offices.

Unfortunately, the initiative did lead to a loss of ten jobs, but no worker faced compulsory redundancy. Moreover, without the trade union led initiative, and if management had unilaterally imposed change when faced with budget cuts, the outcome could have been worse.

Overall, however, the project has been judged an economic success. The initiative has been welcomed by the public, as shown by the feedback from a user opinion survey that showed overwhelming support for the one-stop shop. The public authority, once its initial hostility was overcome has also gained, in that cost savings have been made. Staff have benefited too, through improved job satisfaction and greater empowerment over their working lives. Democratic quality circles have been initiated, and old managerial hierarchies abolished, with front-line staff being involved in the design and delivery of services, and the organisation of their own working time. The union is also reviewing its own structure to identify those support mechanisms that work for its members in the new workplace.

The Swedish Trade Union "Partnership" Approach to Change: Malung

In the late 1980s, the SKAF, the Swedish municipal workers' union, was faced by cuts in local authority budgets. Understanding that the traditional response would be for a combination of cuts in the level of services and staff or privatisation, the union developed its own project that would both save money for local authorities and preserve jobs. Following extensive discussions with its membership the following model was tested in 1991 in the municipality of Malung, where the goal was to achieve a minimum of 10 per cent cost savings for the authority over 3 years while saving jobs.

The union model is based on the active involvement of all employees in a workplace based project. Work groups of between 8-12 people are initiated, each with an elected leader. In addition, one person is appointed to coordinate the groups and to liaise with management. In essence the workers and the union own the project.

A worker education package delivered by SKAF and then purchased by the municipality is developed which focuses on the following seven areas :

the economy, where the budget is broken down to make it accessible and understandable to each employee. Workers then understand the cost of their own and the workplace activity, and their role in providing an efficient service;
planning and follow-up, where small units learn to plan for cooperation and coordination, and knowledge sharing, rather than "stealing" ideas and resources from each other in a competitive manner. Agreement is sought on an overall policy with common goals for better production;
communications and information, where hierarchical decision making structures are broken down and replaced with flatter horizontal structures that empower workers;
public procurement, where agreement is sought to determine the level at which purchasing decisions are made for each unit;
competence development, where a cataloguer of training for each employee is devised. The aim here is to preserve professional knowledge and experience, while learning new skills;
ethics and the human dimension, where employees' opinions of their work alters with increased responsibility for their own initiatives. This allows personal development alongside increased productivity with an emphasis on quality; and
organisation, where structural adjustments are made to tailor the organisation to meet local needs.

Eight to ten months are then spent in analysing the present situation or perceived problems within the organisation. Having identified the strengths and weaknesses of the organisation, concrete proposals for change are then formulated and presented to management on the understanding that unless agreed savings are made within a specific time, the municipality is refunded its money. However, the pilot project in Malung achieved cost savings of over 10 per cent, maintained employment levels, improved services and enriched the lives of the workers. Following its success in Malung, the SKAF has formed a special development unit for this department and has sold the package to over 65 municipalities and counties, thus raising revenue for the union.

The Irish Trade Union "Partnership" Approach to Change: Education

As part of a series of agreements between the government, employers and trade unions, including the teacher unions, since 1987, a process of the development and renewal of the Irish education system has been undertaken. Each of the agreements on social and economic policy included a section on education which was agreed between the teacher unions, the government Department of Education and the employers. These agreements addressed different aspects of the development and improvement of the education system including the link between education and employment and the stance that might be taken to develop the education system in such a way which would improve the opportunities for the employment of students. The agreements placed a strong emphasis on equity and access to educational facilities for all. They promoted adult and continuing education and the targeting of resources towards the education of the disadvantaged.

Partly as a consequence of the progress made under these agreements, a process of review and renewal of the education system as a whole began which culminated in the publication in 1995 of a government White Paper on Education. This was the first major attempt at reflection, redevelopment and redirecting of the education system since the foundation of the Irish State. The White Paper was developed through a process of consultation with all of the educational interests and the social partners. This was an unprecedented attempt to gain support by consensus in society generally on the future of the education system. It involved the publication of a Green Paper to which all interested parties were invited to respond, a major National Convention on Education attended by all interested parties, further conferences on specific topics and finally, the publication of the White Paper based on the submissions and discussions. A further process of consultation is taking place currently on the implementation of various aspects of the White Paper, which contains a commitment that direct negotiations will take place between the teacher unions, the employers and the Department of Education regarding those aspects of the proposals directly affecting their terms and conditions of employment.

Teachers are represented on all committees and working parties that address curricular issues. The White Paper is a wide-ranging document dealing with the philosophical principles underlying the Irish education service, the structures through which the service is delivered, the future of the teaching profession and developing systems for monitoring and evaluating all aspects of the education service.

Long-Term Planning for Public Services

The above examples of the trade union "partnership" approach to change in public services focus mainly on local or sectoral cases. However, trade unions do have a stake in broad macroeconomic issues that encompass long-term planning for public services. The trade union experience here offers a rich vein of "best practice" for the OECD to examine.

One such example comes from Australia, where the Commonwealth government has since 1983 worked in "partnership" with the ACTU, the national council of trade unions to formulate a series of Accords which have transformed the economy, the labour market and the trade union structure. Successive Accords have introduced broad fiscal reforms which have encompassed taxation, health and pension provision, childcare and family protection alongside the introduction of a safety net of basic societal protection to prevent major social groups falling outside the system.

What is different about the Australian example is that through the active involvement of trade unions the Commonwealth budget will over the medium term move to balance on the basis of an equitable tax base for all, but without sweeping cuts in public service provision. Wage moderation has contributed to this, allowing inflation to fall to historically low levels, as part of a wider agenda including job creation. When combined, these elements have increased tax revenue, thus increasing resources for public services and the social wage, while putting a lid on price rises in public sector inputs.

The lesson here is that trade unions can and do play a constructive role in all elements of the macroeconomy, including public services. These issues, however need to be approached as part of a broad strategy of "partnership".

3. Next Steps for The OECD

This TUAC discussion paper has highlighted several of the many innovative examples where trade unions are playing a key role in introducing and managing reform in the public sector and service provision, whether at the macro or microeconomic levels. In all cases, benefits have accrued in terms of cost savings to public authorities, a better provision of service to consumers and better wages and working conditions for employees.

TUAC believes that more needs to be done, and that the OECD has a unique role to play. The Ministerial Symposium on the future of public services should discuss the trade union "best practice" examples of public sector reform, and disseminate them amongst their Ministries for similar action at home.

TUAC was concerned that the OECD Public Management Committee (PUMA) was not more fully involved in the design and follow-up work to the Jobs Study, especially in view of the large role played by public services in national economies, and in overall employment. However, the concerns of policy makers in relation to the future of public services provides an opportunity for the PUMA to initiate a thematic review in conjunction with other departments on service sector employment growth.

Overall, the thematic review could focus on the dynamic role of the public sector in a modern economy, including its role in employment generation and long-term financial planning. Included here should be an analysis of past public sector reforms to ascertain what has and has not worked, especially in relation to the introduction of market mechanisms. On this, the OECD could develop a methodology that allows a meaningful comparison to be made between public and private providers, including a comparative measurement of aspects such as quality, inputs, outcomes, processes, and externalities. A further element for the review relates to the way in which some governments are introducing public and private sector "partnerships" in the production and delivery of public services. The OECD could play a key role by evaluating such schemes, and disseminating "best practice". A systematic review of the way in which trade unions have been a part of the change process, as noted above, should also be included. TUAC and its affiliates would be willing to make a contribution to such a thematic review.


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